Explore comprehensive ratio analysis comparing Tesco and M&S financials, revealing insights on liquidity, profitability, solvency, and efficiency to aid strategic business decisions. Enhance your understanding with expert assignment help UK.
Ratio analysis refers to the quantitative method for determining the firm’s liquidity, efficiency, profitability and solvency position by analysing the financial statement. It is the crucial aspect which aids in providing in-depth information regarding the organization’s working based on which decisions could be initiated. Marks and Spencer (M&S) is the British multinational organization which was established in the year of 1884 in Leeds, England. The firm is involved towards offering a large number of goods which include clothes, home, beauty and food products. Firm is having annual revenue of 11.931 billion pound and employed more than 72316 workers worldwide (Description of M&S, 2023). Tesco is another multinational organization which is offering diversifying products that include clothing, electronics, toys, petrol, financial services and telecommunication. Tesco is having annual revenue of 65.762 billion pound in year 2023. Further, Tesco has recorded the market share of 27.35% and provided job opportunity to over 330000 workers (Description of Tesco, 2024). The current report is based on initiating ratio analysis and comparing financial position of Tesco and M&S over the years. This paragraph includes assignment help online and MBB7008M Finance for Decision Making as key terms to assist students in locating relevant aid for their coursework.
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From the above graph, it has been identified that M&S profits are increasing over the years which indicate the long-term stability of the business entity. In year 2020 and 2021, there is a reduction in profit due to Covid pandemic however in the current times company is able to earn adequate amount of profits.
From the above table, it has been identified that there is increase in current and quick asset ratio of M&S which indicates the firm’s ability in paying off all short term liabilities. However, company is unable to attain ideal ratio which is not a positive indicator for the creditors (Financial statement of M&S, 2023). Further, while comparing with Tesco, M&S is having higher liquidity position which denotes firm’s efficiency in gaining the lender’s trust which further helps in gaining the competitive edge. However, Tesco is having higher quick asset ratio than M&S which indicates the effective inventory management system of entity which helps in avoiding the excessive investment towards stocks (Financial statement of Tesco, 2024). To overcome the issue, both M&S and Tesco should focus on selling out the entire unproductive fixed asset and delay all the fixed asset investment (Zhou, 2024). Along with this, all the short term loans should be paid out which helps in reducing the level of current liabilities. Further, company should focus on early account receivables which help in managing enough cash balance within the firm which result into higher current assets. Further, M&S should introduce adequate inventory management system which helps in avoiding the unnecessary investment in stocks that assists in higher liquidity position.
On the basis of above table, it has been determined that there is no change in the profitability position of M&S over the years which indicate incapability of the firm in increasing the profits. It has been identified that there is an increasing sales but firm is unable to manage its cost due to which profitability ratios become constant (Draper and Akin, 2024). Further, company is effectively using its capital for generating profits which result into highest ROCE. For increasing profits, M&S should invest towards marketing strategies which helps in creating awareness among the larger target market that result into incline in the overall sales. Further, through adequate marketing strategy M&S will be able to attain economies of scale which result into increasing overall net profit of business entity. Moreover, M&S is having higher GP and NP ratio which denotes the firm’s efficiency in attracting the customers and contributes in maintaining their loyalty. It also denotes that Tesco is incapable in optimally utilizing its capital for generating profit whereas M&S is having effective policies for utilizing the capital.
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From the above table, it has been interpreted that M&S is having higher amount of debt as compared to equity which is a positive indicator for the shareholders. However, Tesco is having low debt to equity ratio which denotes that firm is depending more on equity as compared to the debt (AKIN and DRAPER, 2024). This indicates that Tesco is having lower risk than M&S as firm is highly depending on equity which in turn denotes less financial obligation. On the other hand, M&S capital structure is optimum which support in reducing the expenses and thereby leads higher shareholder’s satisfaction. Interest on debt is tax deductible item which helps organization in providing higher return to the shareholders. This also helps M&S in retaining ownership and supports in controlling the overall operation & decision of the organization (Wang and Wang, 2023). However, excessive debt in the capital structure results into increasing financial risk which will impact the overall financial position of the company.
After analysing the above table, it has been depicted that inventory turnover ratio of M&S is increasing which indicate the firm’s efficiency in attracting customer. This also denotes that firm is having adequate marketing strategy which support in increasing turnover ratio (Charles and Uford, 2023). However, Tesco is having higher ITR that shows customers are more satisfied with firm’s product leading to higher sales. Further, it has been determined that M&S is adequately utilizing its assets for generating the revenues. For increasing the ratio, M&S should concentrate on leasing assets than buying, improving inventory management and enhancing overall efficiency (Lokanan, 2021). Additionally, it has been identified that M&S is able to quickly collect its fund from debtor that help in managing overall cash flow of the company. On the other hand, Tesco takes the higher number of days to recover the funds from debtors which create issue in paying out the entire obligation effectively. Moreover, M&S is paying very quickly to its creditors which denote that firm is not effectively utilizing the allotted time period. However, Tesco is paying its creditors after a long time period which helps in generating adequate return in the allotted time period. In this context, M&S should focus on using funds for productive purpose before payment which further helps in gaining the additional benefits.
From the above analysis, it could be stated that M&S is having higher liquidity, solvency and profitability position than Tesco which ultimately leads competitive edge. However, M&S needs to focus on improving efficiency ratio which will help in enhancing overall position than Tesco.
The MBB7008M Finance for Decision Making Assignment sample provides a detailed investment analysis evaluating key financial metrics such as earnings per share, return on assets, dividend payout ratio, and return on equity. The analysis compares companies’ performances, focusing on investment profitability and strategic decision-making. By applying these investment appraisal techniques, the report aids in identifying viable investment opportunities and maximizing shareholder value, supported by assignment help online for better comprehension and application.
Earnings per share: It has been identified that EPS of M&S is increasing over the years which denotes the firm’s efficiency in providing adequate return to the shareholders. However, Tesco is providing lower EPS as company is having higher amount of equity as compared to the debt which result into lower shareholder’s return.
Return on assets: The above table depicts that both the organization is having very low ROA which indicates inefficiency in effectively utilising the firm’s assets for generating the revenue. In this context, organization should focus on expanding customer base and increasing price of goods for the higher profits (Benrqya and Jabbouri, 2021).
Dividend payout ratio: It has been identified that M&S is paying very less percentage of the firm’s earning towards the shareholder which in turn recognized as a negative indicator for the investors.
Return on equity: The above table depicts that M&S is able to effectively utilize its shareholder’s funds for generating the revenue. It is positive indicator for the investors as firm’s policies are adequate which helps in generating the higher income from the investor’s funds. However, Tesco is having lower ROE in 2023 but organization has capability to increase its return. Investors are likely to be attracted by M&S as it is offering higher return than Tesco.
This assignment sample critically examines ratio analysis, highlighting its usefulness and limitations. It explains how ratios simplify complex financial data, supporting decision-making but cautions against reliance on historical data alone. Incorporating non-financial factors enhances the evaluation of a firm’s true financial health. This section reinforces critical thinking skills essential for effective financial analysis in real-world scenarios, with guidance available through assignment help online tailored for MBB7008M Finance for Decision Making.
This is the most effective method which helps in simplifying the complex figures and supports in establishing effective relationship between various elements. Ratio analysis also helps in effectively comparing data of two years which aids in gaining better insight of the firm’s position (Yhip et al, 2020). Ratio analysis also supports in depicting the firm’s actual position which helps in formulating adequate strategic framework effectually and supports in taking the informed decision.
Ratio analysis is based on historical data which creates issue in identifying the current position of business entity (Li, 2023). This method does not undertake inflation rate which result into providing inaccurate comparison between the two consecutive periods.
For gaining an effective outcome, non-financial performance and factors of organization should also be considered which helps in determining the firm’s position prominently.
5. Conclusion
By summing up the report, it has been identified that M&S is having effective profitability, liquidity and solvency position which helps in maintaining the long term stability. However, organization should lay emphasis over enhancing the marketing strategy and improves inventory management system which helps in enhancing the overall performance. Further, firm is providing an adequate EPS and have high ROE which will attract the potential investors.
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